In a divided decision, a Federal Circuit panel ruled on April 1, 2015 that it does not have jurisdiction to hear an interlocutory appeal from a district court’s ruling on a motion to stay pending a Covered Business Method Review (“CBMR”) proceeding unless the Patent Trial and Appeal Board has instituted the CBMR.  See Intellectual Ventures II LLC v. JPMorgan Chase & Co., No. 2014-1724.  This was a case of first impression construing Section 18(b)(2) of the America Invents Act (“AIA”) and turned on the meaning of “proceeding” as used in the AIA.

Section 18(b)(1) of the AIA sets forth four factors for a district court to consider when deciding a motion to stay pending “a transitional [i.e. CBMR] proceeding….”  (Emphasis added)  The factors are consistent with issues that most courts consider when facing a motion to stay, including (i) whether the stay will simplify the issues and streamline the trial; (ii) how far along the case has progressed—whether discovery is complete and a trial date has been set; (iii) whether the nonmoving party would be prejudiced; and (iv) whether a stay would lessen the district court’s and the parties’ burden.  Section 18(b)(2) allows for an immediate interlocutory appeal of a district court’s decision on a motion to stay pending a CBMR.

The majority held that the “proceeding” referred to in Section 18(b) is the CBMR itself—i.e., the filing of a Petition does not initiate a “proceeding” and the PTAB’s review of the Petition is not part of the “proceeding”; rather, a “proceeding” begins once the PTAB grants the Petition.  Thus, because there is no “proceeding” prior to the PTAB granting the Petition, there also is no jurisdiction under Section 18(b)(2) of the AIA for an immediate interlocutory appeal of the district court’s decision on a motion to stay pending CBMR prior to the PTAB granting the Petition.  In reaching this decision, the majority construed the statutory language narrowly and relied on the relevant legislative history, although as they noted, the legislative history does not provide any definitive direction regarding this issue.  In the instant case, the PTAB had not yet granted any of the Petitions at issue when the appeal was filed and, therefore, the Federal Circuit dismissed the appeal for lack of jurisdiction.

In his dissent, Judge Hughes explained that while the majority’s decision is fairly grounded in the statutory language, the ruling is contrary to the purposes of the AIA generally and Section 18(b) in particular.  In Judge Hughes’ opinion, the explicit purpose of the CBMR procedure was to limit costs by providing a streamlined and efficient procedure for reviewing CBMs.  According to Judge Hughes, requiring parties to wait until after the PTAB grants a Petition for CBMR to file a motion to stay, so that they may take advantage of the interlocutory appeal procedure in Section 18(b)(2), undermines those purposes.

This ruling underscores the strategic benefits of filing a petition for CBMR (or Inter Partes Review for that matter) early in the litigation.  District courts have always considered how far the lawsuit has progressed when deciding a motion to stay, and that issue is explicitly identified in Section 18(b)(1) as a factor.  District courts routinely deny motions to stay filed later in a case, and this was a factor in the district court’s denial of the motion to stay in Intellectual Ventures II, which gave rise to the appeal.  Indeed, Judge Hughes noted in his dissent that he would have affirmed the district court’s denial of the motion to stay.  Now that the Federal Circuit has ruled that the interlocutory appeal provision in Section 18(b)(2) is not available until the PTAB has instituted a CBMR, there is even more reason to file a Petition for CBMR early in the case, so that the PTAB can grant the Petition and a motion to stay can be filed as early as possible.  The longer an accused infringer delays in filing a Petition, the more difficult it will be to convince the district court that related litigation should be stayed.